Search This Blog

Wednesday, November 22, 2017

When It Comes to Real Estate Statistics, We Should Think “Median” not “Average”



Excuse me for getting a little nerdy here, but it’s important to know the difference between “median” and “average” when studying the real estate market, and here’s why.

Let’s say an area has five home sales: one at $300,000, a second at $325,000, a third at $330,000, a fourth at $400,000 and a fifth at $1.2 million.  The average sale price would be $511,000, a huge increase over the previous year when all the sales were under $400,000. The median sale price would be $330,000, because half the sales were under that price and half were over.

Now let’s look at “Days on Market.” Let’s say those five homes took 1, 2, 5, 7, and 150 days to go under contract. The average days on market would have been 33, while the median would have been only 5 days. Which is more useful?

These two hypothetical scenarios are precisely what we’re seeing in the real estate market. Luxury homes are selling much more quickly than they have in years past,  inflating the average sales price, whereas the median sales price by definition discards both the lowest and highest data points, providing a more accurate picture of what’s happening in the market.

At right is a chart comparing 2017 average days on market to median days on market.   Homes that take a long time to sell -- particularly in the current market -- are almost invariably overpriced.  The amount of time these homes languish on the market artificially increases the average days on market. The median days on market is a much better reflection of the market.


Despite this, statisticians and market analysts keep reporting changes in the average sales price or the average days on market instead of giving us the more meaningful median statistics.



12 comments:

  1. This comment has been removed by the author.

    ReplyDelete
  2. The median house price is the midway point of all the houses/units sold at market price (or sold amount) over a set period (monthly, yearly, quarterly, etc.). That is, if there were 101 houses sold during the month, the median house price would be the house price in the middle i.e., that has 50 house prices above it and 50 house prices below it.

    Regards,
    Ajay Kumar
    Real Estate Appraiser

    ReplyDelete
  3. This statistic is really interesting. Sorry to say that, I have some confusion about this statistic. I hope you compare with me about this. I think you can click here for more information.

    ReplyDelete
  4. Yes, it's important to know that the value of the median to study the real state market in deep. You can use the https://www.biowritingservice.com/elevator-pitch-writing-guide/ to get an average of the median, its a valuable for the real state businessman.

    ReplyDelete
  5. Hi Dear,

    i Like Your Blog Very Much..I see Daily Your Blog ,is A Very Useful For me.

    Find Independent house buy and sell online in Pennsylvania. Sell2modern.com the best Real Estate Property Site in the world.

    Visit Now - http://www.sell2modern.com/proven-results/

    ReplyDelete
  6. Thanks for sharing the nice post.To make own property like condo living in Griesbach is really great thing about life and there is no special time to make a new property. Once, you got a dream home with affordable price, so it is a good thing to buy it soon.

    ReplyDelete
  7. Many thanks with regard to discussing the actual good publish Visit here . To create personal home such as is excellent point regarding existence as well as there isn't any unique period to create a brand new home. As soon as, you have the desire house along with inexpensive cost, so it's the best thing to purchase this quickly.

    ReplyDelete
  8. The business of real estate is essential as it leads for having perfect things in order. This leads for making ideal working for go ahead in life. This mention in site explore more fro needy acts.

    ReplyDelete
  9. Good blog post, Preparing looks like a light offering light to the people who need to acknowledge, who need to achieve something uncommon. Here you can check this http://midwiferyapplication.com/professional-midwifery-essay-writing-service/ site and get many new ideas and techniques.

    ReplyDelete
  10. Good post, Teachers should ask the weak centers when understudies have completed their assignments. They http://www.mycheatsheet.org/cool-vectors-cheat-sheet/ site their essential mistakes which they have given while creating undertaking. They should base on the substance written in it.

    ReplyDelete